Crop insurance purchase decisions of small-scale irrigation farmers in Chiang Mai, Northern Thailand

Abstract

Crop insurance is an efficient solution to deal with possible financial losses. However, a small number of Thailand’s farmers are aware of this insurance scheme introduced by the government. Therefore this article focuses on the factors that affect farmers’ crop insurance purchase decisions. Data were obtained from 589 farmers who were members of 30 small irrigation systems in northern Thailand. The empirical results show that there are four variables involved in crop insurance purchases: agricultural income, years of residence in the community, the position of a farm in an irrigation system (head and middle), and fuel expense. Thus farmers concerned by the possible effects of agriculture risks on their agricultural income are likely to reduce their risk through crop insurance. Also, when farmers live in the community for a long time, gaining local experience, they may purchase the insurance. Farmers with farms located at the head or middle of an irrigation system tend to receive more water. They have a better overall performance of agriculture and farm income than tail end farmers and can afford crop insurance. Regarding fuel expenses, farmers rely on farm machinery for agricultural production and vehicles for input and product transportation and thereby fuel consumption. Thus the farmers are apt to purchase crop insurance to control financial risk ensuing from fuel price fluctuation.